Newsletter

Editorial: Thanks for extending STAR bond program

It’s an unfortunate fact of life that the state of Kansas and its communities have to give away so much tax revenue to lure new businesses and job-creating activities.

Wouldn’t it be nice if all across the country, cities and communities would agree not to do that anymore? Then communities like Topeka could compete for those economic development projects based on natural assets — in the case of Topeka it would be such assets as personable, hard-working people, a “large hometown” feel, a great place to raise a family, central location and access to air, rail and highway transportation, for example.

But that’s not the way our culture operates these days, so that’s why the Kansas Legislature and Gov. Sam Brownback should be thanked for enacting legislation to extend the STAR bond program for another five years.

In fact, much less tax revenue goes into the program than many think. One problem with programs like the STAR bonds is that it’s so easy to misconstrue them as tax subsidies.

Take a look, for example, at how STAR bonds were used to develop the Kansas Speedway and Sporting facilities at the junction of Interstates 70 and 435 in Wyandotte County. The Unified Government of Wyandotte County has issued $445 million worth of the bonds for the Village West area since 2001.

Sales Tax Revenue (STAR) bonds allow Kansas municipalities to issue bonds to finance major commercial, entertainment and tourism areas. The bonds are paid off using sales tax revenue generated by the new facility. Once the bonds are paid off, the sales tax revenue begins flowing to state coffers.

Some of the Wyandotte County bonds are being paid off earlier than anticipated, thanks to the Legends shopping district, the Schlitterbahn water park and a minor league baseball team.

Opponents of the bond program argue the $445 million is a tax subsidy from local taxpayers. After all, if the project had been built using private financing, the state and the community would begin collecting all that sales tax revenue immediately to hold down property tax.

But that ignores the fact that the project likely wouldn’t have been built where it was if not for the STAR bond funding. Wyandotte County was in competition with Missouri to win the project. Had Missouri won it, Kansas would have seen relatively little tax revenue from the site — just from agricultural land and some limited development.

So, the state didn’t really lose any money by issuing the bonds.

One risk to such programs is they may be used to fund a business or activity that fails.

The state has in place extensive guidelines that have to be met before any bonds will be issued.

For example, public benefits must exceed public costs and the bonds should be used to finance no more than 50 percent of the total project cost.

The state needs to be convinced that about 20 percent of the visitors to the complex will be from out of state and that about 30 percent be from farther than 100 miles.

The state wants to know how many jobs will be created directly by the complex and how the facility will benefit other businesses in the community.

The bond program was to sunset this year, but legislators and the governor acted to extend it to 2017.